Korea's Corporate Tax Interim Payment Is Due 31 August — and the Rate Went Up

What is due on 31 August, and who owes it

Every corporation with a 31 December year-end must file a corporate tax interim return and pay the tax on it by Monday 31 August 2026. The period being taxed is 1 January to 30 June. The National Tax Service put 545,000 corporations in scope this year, 17,000 more than last year, and opened filing through Hometax and the Sontax mobile app on 1 August.

The rule underneath the date is two months from the end of the first six months of the business year. A December year-end gives you 31 August. A June year-end company covers July to December and pays by the end of the following February.

Two things about this catch foreign-invested companies out with some regularity.

The first is that it is a filing obligation, not merely a payment. Transferring the money without submitting the return can still attract a non-filing penalty, which is an expensive way to be broadly compliant.

The second is that a Korean branch of a foreign corporation is inside the regime, not outside it. Where the branch’s business year exceeds six months, the same rules, the same two calculation methods and the same exemptions apply. Only branch profits tax sits outside.

The rate rise reaches this payment — but only through one of the two methods

Korea’s corporate income tax rates went up by one percentage point in every band for business years beginning on or after 1 January 2026, restoring the rates that applied in 2022. The National Assembly passed the amendment on 2 December 2025. This August is the first time that increase touches a cash payment.

Local income tax is a separate tax with its own base, its own credits and the rates in the right-hand column. The national rates in the middle columns exclude it.

Here is the part that matters for the next two weeks. There are two ways to compute the interim payment, and the rate rise reaches only one of them.

The prior-year method takes the corporate tax determined for FY2025, adds any penalty tax, subtracts credits and exemptions, tax withheld at source and any occasional assessment, then multiplies by six over the number of months in that prior year. For a normal twelve-month year that is half of last year’s tax. FY2025 was assessed at 9/19/21/24%, so the increase does not reach this figure at all.

The interim closing method treats 1 January to 30 June 2026 as if it were a complete business year. You close the books on the half-year, annualise the tax base by twelve-sixths, apply the ordinary rates, then multiply the result by six-twelfths. Those ordinary rates are the 2026 ones. The increase reaches this figure in full.

So which method should you choose?

The usual answer is that the interim closing method wins when the first half of the year has been worse than last year, because it charges tax on what you actually earned instead of on a projection from a better year. That is still true. What has changed is the size of the fall required before it wins.

Take a company in the 20% band — a tax base comfortably between KRW 200 million and KRW 20 billion, which is where most foreign-invested subsidiaries in Korea sit. Suppose FY2025 closed with a tax base of KRW 1,000 million.

FY2025 tax at the old rates: KRW 18 million on the first 200 million at 9%, plus KRW 152 million on the next 800 million at 19%. Total KRW 170 million. Half of that is KRW 85 million under the prior-year method, ignoring credits and withholding.

Now suppose the first half of 2026 produced a tax base of exactly KRW 500 million — precisely half of last year’s, so the business is flat. Annualised that is KRW 1,000 million. Tax at the new rates: KRW 20 million on the first 200 million at 10%, plus KRW 160 million on the next 800 million at 20%. Total KRW 180 million, halved to KRW 90 million.

A flat business pays KRW 5 million more by closing its books than by looking backwards. Work out where the two methods meet and the answer is an H1 tax base of about KRW 475 million — roughly 5% below half of last year’s figure. Trading has to be down by more than that before the interim closing method starts saving money, for a company in that band.

That threshold is not universal. It moves with the band you sit in, with credits and exemptions that apply to one computation and not the other, with withholding already suffered, and with anything unusual in either period. But the direction is the same everywhere this year: the bar for the interim closing method is higher than it was, and a company that reflexively closed its books every August should check the arithmetic before doing it again.

There is one group with no choice. About 2,600 corporations belonging to business groups designated by the Korea Fair Trade Commission as subject to public disclosure must use the interim closing method. If your Korean entity is part of a designated group, the decision has been made for you.

And there is one group with no choice in the other direction. Where the prior year produced no computed tax — a loss year, most obviously — the prior-year method yields nothing to halve, and the interim closing method becomes mandatory. A Korean subsidiary that lost money in 2025 and has traded profitably through the first half of 2026 cannot file a nil interim return. It has to close the half-year.

When you do not have to pay at all

Four categories are outside the obligation entirely:

• SMEs whose prior-year-basis interim tax is under KRW 500,000. Note which figure the test uses. It is the prior-year computation, so you can check it without closing anything.
• Corporations newly established during 2026, other than those created by merger or division.
• Non-profit corporations whose only income is interest income.
• Corporations with no revenue in the first half because the business was suspended.

The KRW 500,000 threshold is worth knowing precisely because it is small enough to be forgotten. A dormant-but-registered subsidiary, a newly profitable startup, a liaison office that recently converted — these are exactly the entities whose Korean adviser may still be preparing an interim return nobody owes.

Paying in instalments, and the extension nobody has to apply for

Where the interim tax exceeds KRW 10 million, part of it can be deferred. An SME gets two months, everyone else gets one.

The SME date is 2 November rather than 31 October because 31 October 2026 falls on a Saturday.

Separately, the National Tax Service is extending the payment deadline by two months — from 31 August to 2 November — for small and medium enterprises hit by the high exchange rate, high oil prices, and the Homeplus insolvency. That extension is applied automatically. There is no application, and about 40,000 corporations are covered, worth roughly KRW 0.9 trillion in deferred cash.

If you are not in one of those categories but the payment is genuinely difficult, an extension can still be requested, through Hometax or on paper to your district tax office. The NTS said it will look at those actively. Ask before 31 August, not after.

What this changes for the rest of the year

Nothing about the interim payment is final. It is a payment on account, credited against the FY2026 corporate tax return due in March 2027, and the whole of FY2026 will be assessed at the new rates regardless of which interim method you used. Choosing the prior-year method this month is a cash-timing decision, not a tax saving.

That is worth saying plainly to a head office, because the way this lands in a group reporting pack is usually as a surprise. The effective tax rate on the Korean entity rises about one point this year. The interim payment may not reflect that at all. The gap shows up in March, all at once, in a single settlement payment that looks larger than anyone budgeted for.

The fix is unglamorous: model the FY2026 charge at 10/20/22/25% now, compare it to what the two interim payments will actually have paid, and tell the group what the March number looks like before December’s forecast is locked. Deferred tax balances need the same treatment — a one-point rate change remeasures every deferred tax asset and liability on the Korean balance sheet.

If your Korean filings are handled by a bookkeeper who files what the system pre-fills, the interim payment is where that shows. The pre-fill service on Hometax completes the prior-year method for you, which is convenient and, in a year when the business has turned down, expensive. Our Korean tax and VAT compliance service prices both methods before choosing one, and the underlying bookkeeping is what makes a credible half-year close possible in the two weeks available. If you are also budgeting employment costs for 2027, the flat tax rate for foreign employees is proposed to move as well.

Figures current as at 16 August 2026. Corporate income tax rates and the interim payment rules are set by the Corporate Tax Act and revised annually; the National Tax Service announcement referenced here was issued on 4 August 2026. This is general information about how the Korean rules work, not advice on any particular company’s position.